Damages Expert Allowed in Pfizer Class Action

     MANHATTAN (CN) – A class-action securities lawsuit claiming Pfizer concealed cardiovascular risks of two of its anti-inflammatory drugs got new life after the Second Circuit vacated a prior ruling in the drug company’s favor.
     Tuesday’s 63-page ruling vacated a decision by the Southern New York U.S. District Court, which excluded expert testimony about the plaintiffs’ damages and ruled in favor of Pfizer in the case.
     Second Circuit Judge Debra Ann Livingston said the lower court was wrong to exclude parts of the expert’s testimony because the plaintiffs in the case showed that Pfizer had significant authority over public statements made by the drug manufacturers.
     The lawsuit, which was filed in 2004 by a group of investors that included the Teachers’ Retirement System of Louisiana, alleged that Pfizer had omitted or misrepresented key risks of Celebrex and Bextra. When those risks came to light, Pfizer’s stock price dropped, according to the complaint.
     Pfizer marketed Celebrex and Bextra, which were used to treat chronic pain, starting in 1998 on behalf of manufacturer Searle. Two years later, Searle merged with Pharmacia, and Pfizer continued in its role as marketer. In 2003, Pfizer purchased Pharmacia, thereby giving it exclusive rights to manufacture and sell the drugs, according to court records.
     The class-action lawsuit alleged that Pfizer knew all along about the cardiovascular side effects of the drugs and that it aided Searle, and later Pharmacia, in hiding those risks in communications with the press and in public statements to investors.
     Pfizer would continue to vouch for the drugs’ safety throughout most of 2004, the complaint states. Pfizer even seemed to double down on its safety assertions after its competitor Merck withdrew a similar drug called Vioxx from the market over cardiovascular safety concerns, the lawsuit alleged, citing press releases and advertisements by Pfizer.
     Finally, in October 2004, the New England Journal of Medicine published an article directly questioning the safety of Celebrex and Bextra, after which sales of the highly profitable drugs fell and Pfizer’s stock dropped.
     A class-action lawsuit followed two months later, alleging that Pfizer had authority over Searle and Pharmacia statements and press releases. The U.S. Food and Drug Administration (FDA) ordered the drug company to cease its marketing campaign for the drugs in late 2004.
     The plaintiffs cited a Pfizer fax that stated a Q&A sheet on the drugs’ cardiovascular risks would be first reviewed by Pfizer before being released, as well as testimony from a senior Pfizer manager that Pfizer had signed off on all media responses regarding Celebrex and Bextra.
     During the 10-year case, the plaintiffs also relied on testimony by Daniel Fischel, a business professor and former dean of the University of Chicago, who used event studies and other statistical models to predict how much Pfizer’s stock price had dropped due to news breaking about the two drugs’ health risks.
     Fischel’s models found that Pfizer’s stock price was inflated by $1.46 per share at the time the market learned of the health risks and subsequently fell to zero inflation after Pfizer issued corrective disclosures to investors.
     Pfizer’s expert argued for excluding Fischel’s testimony because it should have separated Pfizer’s statements from those made by Searle and Pharmacia, a point with which the Southern New York Federal Court agreed.
     Without Fischel’s testimony, the plaintiffs were unable to prove key elements of their case – including models that showed how much Pfizer’s stock had dropped due to the misrepresentations – which resulted in the court granting Pfizer summary judgment.
     However, Pfizer’s win was short-lived, as the Second Circuit ruled Tuesday that Fischel’s testimony did not have to disaggregate the companies’ public statements.
     “[T]he district court was incorrect to conclude that, as a matter of law, Pfizer lacked sufficient authority over eight statements by Searle and Pharmacia employees to the press,” Livingston wrote for a three-judge panel.
     Further, Livingston found that the plaintiffs showed that Pfizer had “ultimate authority” over all public statements by the two drug manufacturer.
     “Fischel’s testimony can be helpful to the jury without disaggregating the effects of Pfizer’s specific misrepresentations because it shows that the discovery of information Pfizer allegedly concealed caused shareholders to lose money and calculates the amount of money they lost,” the judge wrote. (Emphasis in original.)
     However, the New York City-based appeals court did not rule on the viability of Fischel’s models or the inflation-maintenance theory he used.
     Pfizer has also been fined in Australia over defending the safety of Celebrex, which violated the country’s strict marketing codes requiring promotional material to be current, accurate and not to mislead either by omission or implication.
     In 2012, Pfizer signed a settlement agreement with 33 states, paying more than $60 million in fines and promising not to make any promotional claims of safety that violated the Food, Drug and Cosmetic Act.
     In a statement, a Pfizer spokesperson said the company was disappointed with the ruling but underscored that the Second Circuit had conceded part of Fischel’s testimony on damages was inaccurate, and therefore inadmissable.
     “The company appropriated communicated accurate and science-based information about its medicines to investors and the public at all times and will continue to defend this case vigorously,” the statement read.

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